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    WePROMOTE NPV Calculation Case Study Week 3

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    Renatus Malimbe
    The document provides a cash flow analysis for equipment with a purchase price of $70,000, annual revenues of $30,000, annual cash outflows of $11,000 excluding depreciation, straight-line depreciation of $14,000 per year, a tax rate of 30%, and a required rate of return of 8%. The net present value of the cash flows is calculated to be $3,716 using a discount rate of 6%.

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    WePROMOTE NPV Calculation Case Study Week 3

    Uploaded by

    Renatus Malimbe
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    The document provides a cash flow analysis for equipment with a purchase price of $70,000, annual revenues of $30,000, annual cash outflows of $11,000 excluding depreciation, straight-line depreciation of $14,000 per year, a tax rate of 30%, and a required rate of return of 8%. The net present value of the cash flows is calculated to be $3,716 using a discount rate of 6%.

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    The document provides a cash flow analysis for equipment with a purchase price of $70,000, annual revenues of $30,000, annual cash outflows of $11,000 excluding depreciation, straight-line depreciation of $14,000 per year, a tax rate of 30%, and a required rate of return of 8%. The net present value of the cash flows is calculated to be $3,716 using a discount rate of 6%.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    5 views1 page

    WePROMOTE NPV Calculation Case Study Week 3

    Uploaded by

    Renatus Malimbe
    The document provides a cash flow analysis for equipment with a purchase price of $70,000, annual revenues of $30,000, annual cash outflows of $11,000 excluding depreciation, straight-line depreciation of $14,000 per year, a tax rate of 30%, and a required rate of return of 8%. The net present value of the cash flows is calculated to be $3,716 using a discount rate of 6%.

    Copyright:

    © All Rights Reserved
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    BUS 5110 Written Assignment 6 Solution

    Required Rate of Return 8%

    Given
    $70,000 for the equipment with useful life of 5 years and no salvage value.
    Expected annual revenues to be $30,000 per year
    Expected annnual cash outflows to be $11,000 excluding deepreciation
    Annual depreciation by straight-line method $14,000
    Tax rate 30%
    Dicount rate 6%
    Revenues are estimated to be: Year 1 Year 2 Year 3 Year 4 Year 5
    30,000 30,000 30,000 30,000 30,000

    Cash Flows
    Year 1 Year 2 Year 3 Year 4 Year 5 NPV
    Purchase Price (70,000) - - - - -
    Cash Outflows - (11,000) (11,000) (11,000) (11,000) (11,000)
    Salvage Value - - - - - -
    Cash Inflows - 30,000 30,000 30,000 30,000 30,000
    Before Tax and Depreciation (70,000) 19,000 19,000 19,000 19,000 19,000
    Depreciation (14,000) (14,000) (14,000) (14,000) (14,000)
    Income Before Tax 5,000 5,000 5,000 5,000 5,000
    Income Tax at 30% rate 1,500 1,500 1,500 1,500 1,500
    Income After Tax 3,500 3,500 3,500 3,500 3,500
    Cash Flows After Tax 17,500 17,500 17,500 17,500 17,500
    Rate per Period at 6% 1.0000 0.9434 0.8900 0.8396 0.7921 0.7473
    NetCashFlowXRate (70,000) 16,509 15,575 14,693 13,862 13,077 3,716

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